Price growth in prime central London lags other markets for first time since 2009

For the first time since 2009 property price growth in the prime central London sector is slower than the UK mainstream market, according to a new analysis from Knight Frank.

Prices in this sector increased by 0.7% in February and the firm says that it underlines how pricing has calmed, particularly at the top, despite a record breaking 40 month run of increases.

Overall the sector has recorded a year on year rise of 7.5% and growth has held steady between 7% and 8.4% over the last year, possibly the most consistent 12 month period since the middle of the 1990s, before monthly data was available.

But this annual growth is below the 9.4% for the mainstream market and evidence of increasing restraint in the prime central London market is that growth rates are lower for more expensive properties. Annual growth ranges from 12.8% in the sub £2million price bracket to 3.4% for £10 million plus homes. The figure was 6.1% for £10 million plus homes last February and 10.7% a year prior to that.

‘It may surprise some given the widespread debate about a price bubble in prime London,’ said Tom Bill, associate residential research, adding that stock levels that are 21% lower than this time last year should keep upwards pressure on prices in the short term.

‘The causes for the shortage include the fact many vendors are declining to sell in the belief they are in a fast rising market which, in prime central London, is less true than it once was,’ he added.

The report also describes how the period of uninterrupted growth began in November 2010, the same month the European Union agreed an €85 billion bailout for Ireland after it experienced one of Europe’s biggest property crashes following the financial crisis.

By the time Ireland left the bailout programme in December 2012, prime central London prices were still rising.

Annual growth, however, had fallen to single digits, signalling a measured slow down was underway rather than anything as dramatic as the Irish experience.

Growth continued to slow in 2013 as the market digested a series of tax changes and more buyers sought value for money beyond the traditional core of prime central London.

Bill also explained that while growth has held steady between 7% and 8.4% over the last year, it is a far cry from 2009, the year following the collapse of Lehman Brothers, when an annual decline of 23.9% in March turned into 6.1% growth by December as the market’s appeal as a safe haven investment grew swiftly.